southlake resources group, llc, cody m. winters, and

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

Civil Action No.: 4:16-cv-992 v.

SOUTHLAKE RESOURCES GROUP, LLC, CODY M. WINTERS, and NICHOLAS R. HAMILTON,

Defendants.

COMPLAINT For its Complaint against Defendants Southlake Resources Group, LLC (“Southlake”),

Cody M. Winters, and Nicholas R. Hamilton, Plaintiff Securities and Exchange Commission

(“SEC” or the “Commission”) alleges as follows:

SUMMARY

1. From approximately June 2010 through approximately September 2014, Winters,

directly and through Southlake, a company he owned and controlled, sold interests in 12 oil-and-

gas joint ventures, raising more than $5.2 million from more than 70 investors in 26 states. None

of the offerings were registered with the Commission, and none of the individuals that Winters

and Southlake employed to cold call potential investors, including Hamilton, were registered

with the SEC as a broker or associated with a registered broker.

2. In written offering material provided to investors, Winters and Southlake made

untrue and misleading statements and omissions of material facts regarding, among other things,

the use of offering proceeds, the allocation of and title to working interests, projections for oil-

Case 4:16-cv-00992-O Document 1 Filed 10/24/16 of 18 PageID 1

and-gas production and revenue, commingling and loaning investor funds, and volume discounts

on the purchase of interests. In each offering, Winters overstated the projected well costs by

almost 100% and omitted to disclose to investors Southlake's actual cost and profit information.

3. At Winters' direction, Southlake also engaged in conduct that was contrary to

written representations to investors about the use of offering proceeds. For example, Southlake

took undisclosed profit and overhead payments from the offering proceeds and used offering

proceeds to acquire working interests for itself in undisclosed transactions. Southlake stated that

certain well revenue was being directed to well operators, when, in fact, Southlake retained the

revenue. Southlake commingled proceeds from multiple offerings. And it selectively sold

interests to certain investors at a 50% discount in undisclosed transactions.

4. By committing the acts alleged in this Complaint, Defendants Winters and

Southlake directly and indirectly engaged in, and unless restrained and enjoined will continue to

engage in, acts, transactions, practices, and courses ofbusiness that violate securities-registration

and anti-fraud provisions of the federal securities laws, specifically Sections 5(a), 5(c), and 17(a)

of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77e(a), 77e(c), and 77q(a)] and

Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and

Exchange Act Rule 10b-5 [17 C.F.R. § 240.10b-5]. Defendants Winters and Hamilton also

directly and indirectly engaged in, and unless restrained and enjoined will continue to engage in,

acts, transactions, practices, and courses of business that violate the broker-registration provision

of the federal securities laws, specifically Section 15(a) of the Exchange Act [15 U.S.C. §

78o(a)].

5. The SEC brings this action seeking permanent injunctions, disgorgement plus

prejudgment interest, and civil penalties as to each Defendant and all other equitable and

Complaint of 18

Case 4:16-cv-00992-O Document 1 Filed 10/24/16 Page 2 of 18 PageID 2

ancillary relief to which the Court determines the SEC is entitled.

JURISDICTION AND VENUE

6. The SEC brings this action under Securities Act Section 20(b) [15 U.S.C. §77t(b)]

and Exchange Act Section 21(d) [15 U.S.C. §78u(d)], seeking to restrain and enjoin the

Defendants permanently from engaging in such acts and practices as alleged herein.

7. The Court has jurisdiction over this action under Section 20(d) and 22(a) of the

Securities Act [15 U.S.C. §§ 77t(d) and 77v(a)] and Sections 21(d), 21(e), and 27 of the

Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].

8. Each of the joint-venture interests offered and sold as described in this complaint

is a "security" as that term is defined under Securities Act Section 2(a)(1) [15 U.S. C. §

77b(a)(l)] and Exchange Act Section 3(a)(10) [5 U.S. C. § 78c(a)(10)].

9. The Defendants, directly and indirectly, made use of the mails or of the means

and instrumentalities of interstate commerce in connection with the transactions, acts, practices,

and courses ofbusiness described in this complaint.

10. Venue is proper because Defendants reside in, and a substantial part of the events,

acts, and omissions giving rise to the claims occurred in, the Northern District ofTexas.

PARTIES

11. Plaintiff SEC is an agency of the U.S. government charged with regulating the

country's securities industry and prosecuting civil and administrative cases to enforce the

country's securities laws.

12. Defendant Southlake is a limited liability company organized under Missouri law,

with its headquarters in Fort Worth, Texas.

13. Defendant Winters is a natural person residing in Fort Worth, Texas.

Complaint of 18


14. Defendant Hamilton is a natural person residing in Fort Worth, Texas.

STATEMENT OF FACTS

The Joint Ventures

15. In or about 2010, Winters founded Southlake to raise capital to acquire working

interests in oil-and gas-wells drilled and operated by third parties. Between 2010 and 2014

Southlake formed 12 joint ventures. During that period, it offered and sold units of interest in

the joint ventures ("Units"), raising $5,235,650 from 70 investors in 26 states. Some investors

invested more than once. For each offering of Units, the table below sets out the joint venture's

name, the number of wells the venture planned to drill, the date the offering began, the amount

Southlake sought to raise, the number of sales, and the total amount actually raised.

Joint Venture Name,;- 3 ,U Number

ofWells

OfferingDate

OfferingAmount

Number

of Sales

Total

Raised

Skywalker Prospect InfieldDrilling Program

1 06/27/10 $700,000 4 $83,750

Ransom Drilling Prospect 1 12/01/10 $500,000 3 $125,000Patriot 3 Well Drilling Fund 1 03/01/11 $1,100,000 5 $150,000Laforce #1 Joint Venture 1 08/01/11 $600,000 8 $110,000SRG 20114-Well DrillingProgram

4 10/20/11 $1,400,000 9 $238,000

SRG Parkerson Bazine Joint

Venture

3 03/20/12 $800,000 4 $60,000

SRG K-4 Joint Venture 4 04/27/12 $800,000 18 $467,500SRG Rein Aldrich Joint

Venture

4 01/04/13 $1,200,000 19 $747,000

SRG Betty Betz FieldDevelopment

4 05/20/13 $800,000 12 $552,500

SRG Sheriff Joint Venture 3 10/07/13 $2,250,000 9 $512,500SRG Aldrich Joint Venture 4 11/29/13 $3,200,000 21 $774,400SRG Raymond Doxon JointVenture

2 04/28/14 $4,340,000 18 $1,415,000

TOTAL 32 $17,690,000 130 $5,235,650

16. Southlake controlled each joint venture. Winters in turn owned and controlled

Southlake. Through Southlake, Winters exercised ultimate control and authority over each

Complaint of 18


venture, including its direction, the content of its public statements, the decision to disseminate

such statements, its disclosures to investors, and all decisions regarding its functions, operations,

and activities.

17. For each joint venture, Winters drafted a Confidential Information Memorandum

("CIM") to provide investors information about the venture. Each CIM contained the number

and price of the Units on offer, the amount sought to be raised, and a table setting out the

anticipated use of investment proceeds. The CIMs were substantially similar for each joint

venture, except for the Unit cost and quantity and the respective descriptions of the well

prospects. After initial contact, Winters typically sent the prospective investor a CIM by FedEx

or email.

The Units Were Securities

18. The CIMs portrayed the investors and Southlake as general partners of one

another, having all the rights of general partners under Texas law. In reality, however, the joint

ventures did not function as general partnerships. Each joint venture was governed by a non-

negotiable joint-venture agreement, which delegated to Southlake the exclusive right and

authority to control and obligate the venture. The joint-venture agreements thereby rendered

illusory the CIM's claims that investors were general partners.

19. Investors had no input concerning which wells to drill or complete or regarding

when or whether to do so. They had no input on how the venture spent investment proceeds or

allocated assets. They had no input on the decision to hire drillers or operators. They had no

direct access to venture bank accounts or financial records. They received no information from

Southlake that would allow them to even identify, much less contact, the joint venture's other

investors—their so-called "partners." And although the joint-venture agreement provided that

Complaint of 18


investors could vote on certain limited actions, Southlake controlled the balloting process and

never sought such a vote on any action.

20. Given the joint-venture agreement's assignment of control to Southlake, the

investors' role in each venture was passive, limited to making an investment ofmoney.

Investors therefore reasonably expected the venture's success to come from the managerial

efforts of Winters and Southlake. Consequently, each joint-venture Unit offered and sold by

Winters and Southlake constituted an investment contract and was, therefore, a security.

21. No registration statement was ever filed with the SEC related to Southlake's offer

and sale of securities.

Winters and Hamilton Acted as Brokers in the Securities Transactions

22. Winters and Hamilton acted as brokers in Southlake's securities transactions.

Winters identified prospective investors throughout the United States from referrals and from

lead lists he purchased. He supervised a staff of commissioned telephone solicitors to cold-call

these investors to offer and sell the Units. He also closed sales initiated by the cold-callers. He

engaged in cold-calling himself. He negotiated securities transactions, advised prospective

investors regarding the investment, and provided them sales materials, including CIMs. And he

completely controlled the Unit-sale proceeds, from which he paid himself $1,150,473.87.

23. From April 2012 through September 2014, Hamilton served as a Vice President

at Southlake. In this role, he cold-called prospective investors to offer Units, distributed sales

materials, including CIMs, advised investors about the investment, and negotiated and closed

sales. He earned a 15% commission on each sale and received commission compensation

totaling $357,570.

24. Despite acting as brokers, neither Hamilton nor Winters has ever been registered

Complaint of 18


as a broker with the SEC, and Hamilton has never been associated with a registered broker.

Although Winters was associated with a registered broker from July 2007 through October 2010,

he continued to broker Southlake securities transactions for more than three years after this

association ended.

Winters and Southlake's Misrepresentations and Misconduct

25. The CIMs contained untrue statements and statements that were rendered

misleading because they omitted information that Winters and Southlake had a duty to disclose.

In the joint-venture offerings, Winters and Southlake also engaged in misleading conduct.

Use ofProceeds

26. Each CIM included a table entitled "Use of Proceeds," which purported to

disclose Southlake's "anticipated" use of investor money. In each CIM, the table provided that

Southlake anticipated using not more than 15% of the proceeds for fees relating to sales,

marketing, and due-diligence. The CIMs generally noted that a fraction of a percentage of the

proceeds would be used for organizational and offering expenses and that the balance—

approximately 85%—would be used for actual well costs such as lease acquisition, drilling,

testing, completion, and geological and geophysical costs. Although the percentages varied

slightly from CIM to CIM, the example below from the SRG Aldrich Venture CIM illustrates

how Southlake disclosed its anticipated use ofproceeds:

USE OF PROCEEDS

AMOUNT %

Organizational & Offering Expenses $20,160.00 .63%

Lease Acquisition, Geological & Geophysical Costs $184,000.00 5.75%

Drilling & Testing Costs $2,027,200.00 63.35%

Completion Costs {Plugging) $488r640.00 15.27%

Sales & Marketing, Due Diligence & Other Fees $480,000.00 15.00%

TOTALS $3,2Q0,G00.00 100.00%

Complaint of 18


27. In reality, in each joint venture, Southlake spent approximately 50% on well

costs, spent approximately 20% on sales commissions and overhead, and retained approximately

30% as profit. The tables were untrue because they misstated Southlake's actual anticipated use

ofproceeds. And they were misleading because they omitted to disclose Southlake's profit and

overhead, disclosures necessary to give a complete and accurate accounting of Southlake's

anticipated use ofproceeds. When Winters drafted and disseminated the CIMs, he knew or was

severely reckless in not knowing that the tables were untrue and misleading.

28. These untrue and misleading statements were material. A reasonable investor

would consider such overstated anticipated expenses and undisclosed anticipated profit and

overhead important in making an investment decision about the joint venture.

29. By taking undisclosed profit and overhead payments from the offering proceeds,

Winters and Southlake acted knowingly or severely recklessly..

Interest Allocations

30. Each CIM contained a statement that the joint venture intended to acquire a

specified maximum percentage of the working interest in each well prospect if the joint venture

became fully capitalized. Among the 12 CIMs, this specified maximum ranged from 20% to

100% of the working interest. The table below sets out the maximum working interest to be

acquired by each joint venture if fully capitalized, as specified in the CIMs.

JointVenture Name % Maximum Working Interest ;# 4i|::Skywalker Prospect Infield Drilling Program 75%

Ransom Drilling Prospect 75%

Patriot 3 Well Drilling Fund 20%

Laforce #1 Joint Venture 100%

SRG 2011 4-Well Drilling Program 50%

SRG Parkerson Bazine Joint Venture 50%

SRG K-4 Joint Venture 25%

SRG Rein Aldrich Joint Venture 40%

SRG Betty Betz Field Development 25%

Complaint of 18


Joint Venture Name Maximum Working InterestSRG Sheriff Joint Venture 100%

SRG Aldrich Joint Venture 100%

SRG Raymond Doxon Joint Venture 100%

31. Each CIM contained a table entitled "Interest Allocations," showing who would

own or otherwise share in each prospect well's royalty interest ("RI"), working interest ("WI"),

and net revenue interest ("NRI"). The table below from the SRG Raymond Doxon Joint Venture

is an example showing generally how the CIMs disclosed well-prospect interest allocations:

INTEREST ALLOCATIONS

RI WI NRI

OVERRIDING ROYALTY INTEREST 20.00% - 20.00%

SRG RAYMOND DOXON JOINT VENTURE - 100.00% 80.00%

TOTALS 20.00% 100.00% 100.00%

32. The CIMs' interest-allocation statements were inaccurate. In reality, Southlake

intended to use, and did use, offering proceeds in undisclosed transactions to acquire for itself

approximately three percentage points of the working interest earmarked for each joint venture.

Therefore, even if the joint venture was fully capitalized, it could not have acquired the

maximum working interest percentage specified in the CIM. The interest allocation tables were

misleading because they did not include Southlake's working interest allocation or its

corresponding net revenue interest allocation.

33. When Winters drafted and disseminated each CIM, he knew or was severely

reckless in not knowing that the statements regarding working-interest acquisition and interest

allocation were untrue and misleading. These untrue and misleading statements were material.

A reasonable investor would consider Southlake's undisclosed use ofproceeds to acquire a share

of the working interest earmarked for the joint venture important in making an investment

decision about the joint venture. A reasonable investor would likewise consider interest

Complaint of 18


allocations in the wells important in making an investment decision about the venture.

34. By using offering proceeds to acquire working interests for themselves in

undisclosed transactions, Winters and Southlake acted knowingly or severely recklessly.

35. In addition, 10 of the CIMs contained a statement that a third party well operator

would receive approximately 20% of the net revenue interest in exchange for its services. This

statement was misleading because it omitted to disclose that the operator maintained only a

"back-in interest." The back-in interest—described in contracts that Winters negotiated between

Southlake and the operator—entitled the operator to 20% of the net revenues only after the well

reached "payout." Payout is the point at which the well generates revenues greater than the cost

charged by the operator to drill, test, complete, and operate the well. Unbeknownst to investors,

until payout, Southlake kept the 20% net revenue interest for itself.

36. Winters knew or was severely reckless in not knowing that the statements

regarding the operator's 20% net revenue interest were misleading. These misleading statements

were material. A reasonable investor would consider Southlake's receipt of the operator's 20%

net revenue interest important in making an investment decision about the joint venture.

37. By receiving the operator's 20% net revenue interest in undisclosed transactions,

Winters and Southlake acted knowingly or severely recklessly.

38. The foregoing undisclosed interest allocations had a material impact on the

distribution of well revenues. Southlake received approximately $1.3 million in oil-and-gas

revenues, but it only distributed approximately $800,000 to investors.

Projections

39. The CIMs contained unsubstantiated performance projections that were not

consistent with Southlake's prior experience. For example, by the time Southlake started the

Complaint of 18


SRG Aldrich Joint Venture in 2013, it had drilled more than 30 wells since 2010 in the same

geographical area as the SRG Aldrich well prospects. The SRG Aldrich CIM projected that

producing wells could return investors initial principal in 7 to 42 months, assuming total oil

production between 100,000 barrels and 400,000 barrels. In reality, no wells in any Southlake

joint venture had ever produced oil in sufficient quantities to return investor principal. None of

the wells in Southlake's previous joint ventures had ever even reached the minimum 100,000-

barrel assumption. Moreover, the SRG Aldrich projections assumed oil production ranging from

50 to 300 barrels of oil per day. But only two of Southlake's wells had ever produced more than

100 barrels per day, and even those wells failed to sustain that level of production for more than

a few months.

40. Moreover, each CIM contained a misleading analysis of existing oil-and-gas

activity in proximity to the prospect wells. In particular, the CIMs included projected production

rates for Southlake's prospect wells based on the most successful wells in the surrounding area,

but ignored dry holes and lesser producing wells. As a result, the CIMs conveyed the misleading

impression that the well prospects were far more favorable than they actually were.

41. Winters knew or was severely reckless in not knowing that the foregoing

projections were misleadingbecause they had no reasonable basis. These misleading statements

were material. A reasonable investor would consider Southlake's accurate production and

revenue estimates important in making an investment decision about the joint venture.

Working-Interest Title

42. Each CIM stated that title to the joint venture's property would be held in the

name of the joint venture. This statement was untrue. In reality, Southlake held the title to the

joint venture's working interests. Southlake never took steps to transfer joint-venture property

Complaint of 18


from Southlake's name to the joint venture's name.

43. Winters knew or was severely reckless in not knowing that the CIM statements

regarding title to the joint venture's property were untrue. These untrue statements were

material. A reasonable investor would consider the title holder ofjoint-venture property to be

important in making an investment decision about the joint venture.

Commingled Funds and Loans

44. The CIMs asserted that there would be no commingling of funds between the

venture and Southlake or any of its affiliates. For at least the first three ventures, however, all

investor money was deposited into a single Southlake bank account and no efforts were made to

ensure that the funds were not commingled. Subsequently, Winters set up separate bank

accounts for each joint venture, but he used Southlake's tax identification number to set up all

the accounts. Therefore, despite the name on the account, Southlake, not the joint venture, was

the account holder.

45. The CIMs also include a "dealings among related parties" clause, which stated

that there will be no loans between the venture and any other entities controlled by Southlake or

its affiliates. However, Winters on occasion used funds from one joint venture to loan money for

expenses of another joint venture that was not fully funded yet. A reasonable investor would

consider it important to know that investor funds were used to pay for drilling expenses unrelated

to the joint venture.


regarding commingling and loans were untrue. These untrue statements were material. A

reasonable investor would consider it important in making an investment decision about a joint

venture that the joint venture's funds were held in a non-joint-venture account, commingled with

Complaint of 18


other funds, or used for loans to other entities.

47. By commingling and loaning investor funds among the joint ventures, contrary to

their written representations, Winters and Southlake acted knowingly or severely recklessly.

Discountsfor Certain Investors

48. Each CIM provided that Units would be offered to investors at a fixed price and

that Southlake "may provide a Volume Discount of 5% to 10% for purchases of 3 or more

Units." This statement regarding a discount was untrue. In reality, Winters offered discounts to

certain investors, regardless of the volume of Units purchased. Several investors accepted the

offer and received a 50% discount, paying for half a Unit but receiving a full Unit. These

discounted sales were never disclosed to the other investors.


regarding discounts were untrue. These untrue statements were material. A reasonable investor

would consider such discounts for certain investors to be important in making an investment

decision about the joint venture.

50. By selling Units at a 50% discount in undisclosed transactions, Winters and

Southlake acted knowingly or severely recklessly.

FIRST CLAIM FOR RELIEF

Violations of Exchange Act Section 10(b) and Exchange Act Rule 10b-5Against Winters and Southlake

51. Plaintiff SEC re-alleges and incorporates paragraphs 1 through 50 of this

Complaint by reference as if set forth verbatim in this Claim.

52. Defendants Winters and Southlake directly or indirectly, singly or in concert with

others, in connection with the purchase and sale of securities, by use of the means and

instrumentalities of interstate commerce or by use of the mails, have (a) employed devices,

Complaint of 18


schemes, and artifices to defraud; (b) made untrue statements of material facts and have omitted

to state material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading; and (c) engaged in acts, practices,

and courses ofbusiness which operated as a fraud and deceit upon purchasers, prospective

purchasers, and other persons.

53. Defendants Winters and Southlake engaged in the above-referenced conduct and

made the above-referenced untrue and misleading statements knowingly or with severe

recklessness.

54. By reason of the foregoing, Defendants Winters and Southlake have violated, and

unless enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)]

and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder.

SECOND CLAIM FOR RELIEF

Violations of Securities Act Section 17(a)Against Winters and Southlake



56. By engaging in the engaging in the acts and conduct alleged herein, Defendants

Winters and Southlake directly or indirectly, singly or in concert with others, in the offer and sale

of securities, by use of the means and instruments of transportation and communication in

interstate commerce or by use of the mails, have (a) employed devices, schemes, or artifices to

defraud; (b) obtained money or property by means of untrue statements of material fact or

omissions to state material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading; and (c) engaged in transactions,

practices, or courses of business which operated or would operate as a fraud or deceit.

Complaint of 18


57. With respect to violations of Securities Act Sections 17(a)(2) and (3), Defendants

Winters and Southlake were negligent in their conduct and in the untrue and misleading

statements alleged herein. With respect to violations of Securities Act Section 17(a)(1),

Defendants Winters and Southlake engaged in the referenced conduct and made the referenced

untrue and misleading statements knowingly or with severe recklessness.

58. By reason of the foregoing, Defendants Winters and Southlake have violated and,

unless enjoined, will continue to violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

THIRD CLAIM

Violations of Securities Act Sections 5(a) and 5(c)Against Winters and Southlake



60. Defendants Winters and Southlake, directly or indirectly, singly or in concert with

others, have offered to sell, sold, and delivered after sale, certain securities and have (a) made

use of the means and instruments of transportation and communication in interstate commerce

and of the mails to sell securities, through the use of email, interstate carrier, brokerage

transactions, or otherwise; (b) carried and caused to be carried through the mails and in interstate

commerce by the means and instrumentsof transportation such securities for the purpose of sale

and for delivery after sale; and (c) made use of the means or instruments of transportation and

communication in interstate commerce or of the mails to offer to sell such securities.

61. By reason of the foregoing, Defendants Winters and Southlake have violated, and

unless enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C.

§§ 77e(a) and 77e (c)].

FOURTH CLAIM

Violations of Securities Exchange Act Section 15(a)

Complaint of 18


Against Winters and Hamilton



63. Defendants Winters and Hamilton, while engaged in the business of effecting

transactions in securities for the account of others, made use of the mails or the means or

instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to

induce the purchase or sale of, a security without being registered in accordance with Section

15(a) of the Exchange Act.

64. By reason of the foregoing, Defendants Winters and Hamilton have violated, and

unless restrained and enjoined will continue to violate, Section 15(a) of the Exchange Act [15

U.S.C. § 78o(a)].

PRAYER FOR RELIEF

WHEREFORE, the SEC respectfully requests that the Court enter a judgment:

I.

Permanently enjoining DefendantsWinters and Southlakefrom future violations of

Sections 5(a), 5(c), and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], and

Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. §

240.10b-5].

II.

Permanently enjoining Defendants Winters and Hamilton from future violations of

Section 15(a) of the Exchange Act [15 U.S.C. §78o(a)].

III.

Ordering Defendant Winters to disgorge ill-gotten gains from the conduct alleged herein

Complaint of 18


in the amount of $1,150,473.87 plus prejudgment interest of $62,792.83.

IV.

Ordering Defendant Hamilton to disgorge ill-gotten gains from the conduct alleged

herein in the amount of $357,570.00 plus prejudgment interest of $19,516.18.

V.

Ordering Defendant Southlake to disgorge ill-gotten gains from the conduct alleged

herein in the amount of $3,727,606.13 plus prejudgment interest of $203,452.69.

VI.

Imposing a civil penalty of $160,000.00 against Defendant Winters pursuant to Section

20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15

U.S.C. § 78u(d)(3)] for violations of the federal securities laws as alleged herein;

VII.

Imposing a civil penalty of $50,000.00 against Defendant Hamilton pursuant to Section

21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] for violations of the federal securities laws

as alleged herein;

VIII.

Imposing a civil penalty of $160,000.00 against Defendant Southlake pursuant to Section

20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15

U.S.C. § 78u(d)(3)] for violations of the federal securities laws as alleged herein; and

Complaint of 18


IX.

Imposing such other and further relief as the SEC may show itself entitled.

Dated: October 24, 2016 Respectfully submitted,

Timothy S/McColeMississippi Bar No. 10628United States Securities and Exchange CommissionFort Worth Regional Office801 Cherry Street, Suite 1900Fort Worth, Texas 76102

(817)978-6453(817) 978-4927 (facsimile)[email protected] for Plaintiff

Complaint of 18


js 44 Keverse (Kev. 3/yy;

CIVIL COVER SHEETThe JS-44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required bylaw, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use ofthe Clerk of Court for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

I.(a) PLAINTIFFS

U.S. SECURITIES AND EXCHANGE

COMMISSION

(b) COUNTY OF RESIDENCE OF FIRST LISTED PLAINTIFF

Defendants-

Southlake Resources Group, LUC,Cody M. Winters, andNicholas R. Hamilton

County of Residence of First Listed Defendant:(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY) Tarrant

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE

TRACT OF LAND INVOLVED.

(C) ATTORNEY (FIRM NAME, ADDRESS, AND TELEPHONE NUMBER)

Timothy S. McColeU.S. Securities & Exchange Commission801 Cherry Street, Suite 1900, Unit 18Fort Worth, TX 76102-6882 (817)978-6453

ATTORNEYS (IF KNOWN)

Jason Lewis, Esq.Greenberg Traurig, LLP2200 Ross Avenue, Suite 5200Dallas, Texas 75201

214-556-3606

II. BASIS OF JURISDICTION (place an x in one box only) III. CITIZENSHIP OF PRINCIPAL PARTIES <p^" a£ INon°ne box* f§r(For Diversity Cases Only) defendant)

PTF PTF PTF PTFH 1 U.S. Government • 3 Federal Question

Plaintiff (U.S. Government Not a Party)

• 2 U.S. Government • 4 DiversityDefendant (Indicate Citizenship of Parties

in Item III)

Citizen of This State D1 Q1 Incorporated or Principal Place L7J4 Q4of Business In This State

Citizen of Another State D2 D2Incorporated and Principal Place • 5 • 5

Citizen or Subject of a L~~J 3 D3 of Business in Another StateForeign Country

Foreign Nation • 6 • 6

IV. NATURE OF SUIT {PLACE AN "X" IN ONEBOX ONLY)

CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES

• 110 Insurance• 120 Marine• 130 Miller Act• 140 Negotiable Instrument• 150 Recovery of Overpayment

& Enforcement of Judgment

PERSONAL INJURY PERSONAL INJURY

• 310 Airplane O 362 Personal Injury-D 315 Airplane Product Med.Malpractice

Liability LI 365Personal Injury -• 320 Assault, Libel a Product Liability

Slander

• 330 Federal D 368 Asbestos PersonalEmployers' Liability Injury Product LiabilityD 340 Marine PERSONAL PROPERTY

• 345 Marine Product • 370 Other FraudLiability • 371 Truth in Lending

• 350 Motor Vehicle • 380 Other PersonalProperty Damage

• 355 Motor Vehicle • 385 Property DamageProduct Liability Product Liability

• 360 Other PersonalInjury

• 610 AgricultureD 620 Other Food & Drug• 625 Drug Related Seizure of

Property 21 USC 881D 630 Liquor Laws

• 640 R.R. & Truck

• 650 Airline Regs.D 660 Occupational Safety/Health• 690 Other

• 422 Appeal 28 USC 156

• 423 Withdrawal28 USC 157

• 400 State Reapprotionment• 410 Antitrust• 430 Banks and Banking• 450 Commerce/ICC

Rates/etc.

• 460 Deportation

• 151 Medicare Act PROPERTY RIGHTS • 470 Racketeer Influencedand Corrupt Organizations

• 152 Recovery of DefaultedStudent Loans (Excl. Veterans)

• 820 Copy rights• 830 Patient

• 840 Trademark

D 810 Selective ServiceH 850 Securities

Commodities/ Exchange

• 153 Recovery OF Overpaymentof Veteran's Benefits

LABOR SOCIAL SECURITY • 875 Customer Challenge12 USC 3410

• 160 Stockholders'Suits

• 190 Other Contract• 195 Contract Product Liability

• 710 Fair Labor Standards Act

• 720 Labor/Mgmt. Relations

Q 730 Labor/Mgmt. Reporting &Disclosure Act

• 740 Railway Labor Act

• 790 Other Labor Litigation

D 791 Empl. Ret. Inc.Security Act

D 861 HIA(1395FF)• 862 Black Lung (923)D 863 DIWC/DIWW (405(g))

• 864 SSID Title XVI

• 865 RSI (405(g))

• 891 Agricultural Acts• 892 Economic Stabilization

Act

REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS • 893 Environmental Matters• 894 Energy Allocation Act

• 210 Land Condemnation • 441 Voting

D 442 Employment• 443 Housing/Accommodations

• 444 Welfare• 440 Other CivilRights

D 510 Motions to VacateSentence

Habeas Corpus:• 530 GeneralD 535 Death Penalty• 540 Mandamus & Other• 550 Civil Rights

FEDERAL TAX SUITS • 895 Freedom ofInformation Act

• 220 Foreclosure• 230 Rent Lease & Ejectment• 240 Torts to Land

D 245 Tort Product Liability• 290 AllOther Real Property

D 870 Taxes (U.S. Plaintiff orDefendant)

• 871 IRS - Third Party26 USC 7609

D 900 Appeal of FeeDetermination Under

Equal Access to Justice• 950 Constitutionalityof

State Statutes

• 890 Other Statutory Actions

V. ORIGIN

I 1 OriginalProceeding

• 2 Removed fromState Court

(PLACE AN "X" IN ONE BOX ONI. V)

• 3 Remanded fromAppellate Court

• 4 Reinstated orReopened

D 5 Transferred fromanother district

(Specify)

• 6 MultidistrictLitigation

• 7 Appeal to DistrictJudge from MagistrateJudge

VI. CAUSE OF ACTION (CITE THE U.S. CIVIL STATUTE UNDER WHICH YOU ARE FILING AND WRITE BRIEF STATEMENT OF CAUSE. DO NOT CITE JURISDICTIONAL STATUTES UNLESSdiversity.) Securities Fraud

Violations of Section: Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77e(a), 77e(c), and 77q(a)] andSection 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5 [17 C.F.R. §240.10b-5],VII. REQUESTED IN

COMPLAINT:

CHECK IF THIS IS A CLASS ACTION

• UNDER F.R.C.P. 23

VIII. RELATED CASE(S) (See Instructions):IF ANY

DATE

October 24, 2016FOR OFFICE USE ONLY

Receipt # AMOUNT

JUDGE DOCKET NUMBER

SIGNATURE OF ATTORNEY OF RECORD

APPLYING IFP

DEMAND $ CHECK YES only if demanded in complaint:

JURY DEMAND • yes B no

f^i^jijsa^7JUDG MAG. JUDGE

Case 4:16-cv-00992-O Document 1-1 Filed 10/24/16 Page 1 of 1 PageID 19

southlake resources group, llc, cody m. winters, and

Documents